2008 Emergency Economic Stabilization Act


The Emergency Economic Stabilization Act of 2008 was legislation passed in the wake of the international credit and subprime mortgage crisis that began to make itself known around 2007. The legislation established the Troubled Assets Relief Program (TARP) which was created to purchase "troubled assets" from institutional investors. The legislation was signed into law by President George W. Bush in October 2008.


Throughout the 1990s and the first years of this century, homeownership rates in the United States climbed steadily, rising to a peak of nearly 70% in 2004. The increasing percentage of homeowners is attributable to many reasons, the most important being the expansion of credit available to Americans as a result of an increase in foreign credit, very low interest rates, and the relaxation of lending standards which enabled lower-income Americans to purchase homes. The increasing number adjustable rate mortgage (ARM) loans and subprime loans contributed to a speculative housing market and a housing price bubble. Many economists point to 2007 as the year in which the housing bubble burst. As a consequence, home values dropped just as the ARM rates began increasing, making it difficult for many homeowners to pay their mortgages. These loans, which previously provided banks with a high rate of return, were now deemed "toxic" and became liabilities rather than assets.

The credit crunch grew into a full-blown crisis by mid-2008. By mid-September, the massive investment services company Lehman Brothers filed for Chapter 11 bankruptcy protection. Business leaders and politicians, led by Treasury Secretary Henry Paulson, mobilized in an attempt to contain the crisis. Legislation first appeared in September, but the politics of the presidential election prevented its quick passage. A final bill was developed in early October which created TARP, a program that authorized the United States Treasury to spend up to $700 billion to purchase trouble assets both domestically and internationally. President Bush signed the legislation into on October 3, 2008.

Although the legislation is credited by many with containing the spread of the financial crisis, many others criticize the legislation as a unjustified bailout of Wall Street. The critics feel that Wall Street bankers and investment companies should bear the full risk of their investments. Critics also were concerned that the TARP would contribute the national debt and thus create future problems in the credit market.


The Emergency Economic Stabilization Act of 2008 (Pub. Law No.: 110-343).

"Chronology of Federal Responses to the Financial Crisis, 2007-2008." In Congress and the Nation, 2005-2008, vol. 12, 192-96. Washington, DC: CQ Press, .

"Economic Crisis Hits United States: 2007-2009." In Congress and the Nation, 2005-2008, vol. 12, 163-91. Washington, DC: CQ Press, .

"Financial Sector Aid: TARP, 2008." In Congress and the Nation, 2005-2008, vol. 12, 154-59. Washington, DC: CQ Press, .

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